<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08231
-------------------
Spirit of America Investment Fund, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
477 Jericho Turnpike
Syosset, NY 11791-9006
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
SSH Securities, Inc.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (516) 390-5555
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Date of fiscal year end: October 31, 2003
---------------------
Date of reporting period: October 31, 2003
---------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
December 2003
Dear Shareholder,
We are pleased to present you with the annual report of the Spirit of
America Real Estate Fund for the period ended October 31, 2003. We believe that
the fund will continue to benefit from the continued growth of the economy.
It is our belief that our present holdings have not fully appreciated in
value and that we have invested in several sectors and individual companies
which are still substantially under-valued due to short term factors or
circumstances.
Because of low interest rates over the past year, housing starts and sales
grew and this was a cause for vacancies in many apartment REITS. This gave us
the opportunity to invest at advantageous prices. In addition, we believe that
tax law changes have not had their full positive impact on the economy. As a
result, our recent investments in multi-family apartment, shopping center,
industrial and office REITs have not completely benefited from economic
increases.
It is our intention to continue investing in under-valued sectors and
stocks, while always attempting to minimize risks. However, please note that
REITS are subject to the normal risks associated with the ownership of real
estate. These include possible declines in value, environmental problems and
changes in interest rates.
For more complete information about the Spirit of America Real Estate Fund
and a prospectus, call your broker or (800) 452-4892 or (610) 382-7819. Please
read the prospectus completely before investing.
We are grateful for your investment and support, and we will strive to
continue to produce similar successful results.
Sincerely,
David Lerner
<Page>
ILLUSTRATION OF $10,000 INVESTMENT
(UNAUDITED)
SPIRIT OF AMERICA REAL ESTATE FUND - CLASS A
The graph below compares the increase in value of a $10,000 investment in the
Spirit of America Real Estate Fund - Class A with the performance of the Morgan
Stanley REIT Index. The values and returns for the Spirit of America Real Estate
Fund - Class A include reinvested dividends, and the impact of the maximum sales
charge placed on purchases. The returns shown do not reflect taxes that a
shareholder would pay on fund distributions or on the redemption of fund shares.
[CHART]
Average Annual Total Returns
Periods Ended October 31, 2003
<Table>
1 Year 23.20%
5 Year 11.33%
Since Inception 7.35%
</Table>
<Table>
<Caption>
SPIRIT OF AMERICA REAL ESTATE FUND - CLASS A* MORGAN STANLEY REIT INDEX
- -------------------------------------------------------------------------------------------------------
01/09/98 9,479 10,000
04/30/98 9,109 9,735
10/31/98 8,362 8,468
04/30/99 8,552 8,819
10/31/99 7,828 7,938
04/30/00 8,032 8,833
10/31/00 8,480 9,382
04/30/01 10,145 10,411
10/31/01 10,718 10,626
04/30/02 12,567 12,575
10/31/02 11,604 11,336
04/30/03 12,853 12,595
10/31/03 15,094 15,184
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Fund commenced operations January 9, 1998.
<Page>
ILLUSTRATION OF INVESTMENT
(UNAUDITED)
SPIRIT OF AMERICA REAL ESTATE FUND - CLASS B
The graph below compares the increase in value of a $10,000 investment in the
Spirit of America Real Estate Fund - Class B with the performance of the
Morgan Stanley REIT Index. The values and returns for the Spirit of America Real
Estate Fund - Class B include reinvested dividends, and the impact of the
contingent deferred sales charge at redemption. The returns shown do not reflect
taxes that a shareholder would pay on fund distributions or on the redemption of
fund shares.
[CHART]
Average Annual Total Returns
Periods Ended October 31, 2003
<Table>
1 Year 23.36%
5 Year 10.47%
Since Inception 7.43%*
</Table>
<Table>
<Caption>
SPIRIT OF AMERICA REAL ESTATE FUND - CLASS B* MORGAN STANLEY REIT INDEX
- --------------------------------------------------------------------------------------------------------------
03/06/98 10,000 10,000
04/30/98 9,405 9,950
10/31/98 8,592 8,655
04/30/99 8,761 9,013
10/31/99 7,983 8,113
04/30/00 8,174 9,028
10/31/00 8,599 9,589
04/30/01 10,259 10,641
10/31/01 10,797 10,860
04/30/02 12,616 12,852
10/31/02 11,616 11,586
04/30/03 12,819 12,873
10/31/03 14,997 15,519
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Effective March 6, 1998, the Fund began offering Class B shares.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2003
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
COMMON STOCKS - 98.55%
APARTMENTS (REITS) - 22.08%
Amli Residential Properties Trust 113,300 $ 2,882,352
Apartment Investment & Management Co. 158,800 6,494,920
Associated Estates Realty Corp. 372,000 2,403,120
Cornerstone Realty Income Trust, Inc. 265,400 2,194,858
Gables Residential Trust 151,800 4,884,924
Mid-America Apartment Communities, Inc. 193,200 6,066,480
Pennsylvania Real Estate Investment Trust 117,900 3,937,860
Post Properties, Inc. 121,500 3,207,600
United Dominion Realty Trust, Inc. 52,000 907,400
--------------
32,979,514
--------------
DIVERSIFIED (REITS) - 7.75%
BNP Residential Properties, Inc. 128,100 1,416,786
Colonial Properties Trust 41,900 1,550,300
Crescent Real Estate Equities Co. 189,900 2,914,965
Duke Realty Corp. 4,000 117,120
FrontLine Capital Group * 640 6
Hospitality Properties Trust 32,300 1,184,441
PMC Commerical Trust 2,400 33,552
Sizeler Property Investors, Inc. 159,300 1,679,022
U.S. Restaurant Properties, Inc. 168,000 2,688,000
Vornado Operating, Inc.* 250 139
--------------
11,584,331
--------------
HEALTHCARE (REITS) - 13.55%
CLC Healthcare, Inc.* 400 370
Five Star Quality Care, Inc. * 1,353 4,424
Health Care Property Investors, Inc. 98,000 4,569,740
Health Care REIT, Inc. 147,100 4,876,365
Healthcare Realty Trust, Inc. 102,500 3,459,375
National Health Investors, Inc. 76,200 1,619,250
Nationwide Health Properties, Inc. 257,100 4,704,930
National Health Realty, Inc. 53,600 897,264
OMEGA Healthcare Investors, Inc.* 9,000 67,500
Senior Housing Properties Trust 2,700 40,203
--------------
20,239,421
--------------
INDUSTRIAL (REITS) - 8.44%
Bedford Property Investors, Inc. 13,000 341,380
Brandywine Realty Trust 16,000 405,440
First Industrial Realty Trust, Inc. 210,351 6,794,337
Keystone Property Trust 221,900 4,438,000
Prime Group Realty Trust * 101,200 629,464
--------------
12,608,621
--------------
</Table>
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
INTERNET CONTENT - 0.00%
VelocityHSI, Inc.+ 1,260 -
--------------
NET LEASE (REITS) - 6.56%
Commercial Net Lease Realty 271,116 4,663,195
IStar Financial, Inc. 10,000 380,600
Lexington Corporate Properties Trust 248,700 4,770,066
--------------
9,813,861
--------------
OFFICE SPACE (REITS) - 13.68%
Arden Reality, Inc. 107,100 2,995,587
Glenborough Realty Trust, Inc. 174,000 3,393,000
Great Lakes REIT 24,300 389,529
Highwoods Properties, Inc. 182,500 4,525,999
HRPT Properties Trust 571,100 5,345,496
Koger Equity 40,000 774,800
Mack-Cali Realty Corp. 51,600 1,944,804
Reckson Associates Realty Corporation 47,800 1,062,116
--------------
20,431,331
--------------
REGIONAL MALLS (REITS) - 11.68%
Crown American Realty Trust 350,500 4,198,990
Glimcher Realty Trust 320,550 6,789,249
Macerich Company, The 82,200 3,304,440
Mills Corporation, The 69,700 2,843,760
Simon Property Group, Inc. 6,000 270,480
Taubman Centers, Inc. 2,000 40,320
--------------
17,447,239
--------------
SHOPPING CENTERS (REITS) - 13.02%
Burnham Pacific Properties, Inc. * 11,000 3,548
Developers Diversified Realty Corp. 146,104 4,222,406
Equity One, Inc. 139,500 2,336,625
Federal Realty Investment Trust 77,600 2,944,920
Malan Realty Investors, Inc. * 5,000 24,050
New Plan Excel Realty Trust 236,510 5,368,777
Price Legacy Corporation * 2,200 7,546
Ramco-Gershenson Properties Trust 165,300 3,991,995
Realty Income Corporation 14,000 551,600
--------------
19,451,467
--------------
</Table>
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
STORAGE (REITS) - 1.79%
Shurgard Storage Centers, Inc., Cl. A 4,000 144,800
Sovran Self Storage, Inc. 74,800 2,531,980
--------------
2,676,780
--------------
TOTAL COMMON STOCKS
(Cost $119,609,971) $ 147,232,565
--------------
PREFERRED STOCKS - 0.12%
NET LEASE (REITS) - 0.12%
Commercial Net Lease Realty 9% Series A
(Cost $152,677) 6,352 173,092
--------------
TOTAL INVESTMENTS - 98.67%
(Cost $119,762,648**) 147,405,657
CASH AND OTHER ASSETS NET OF LIABILITIES - 1.33% 1,987,356
--------------
NET ASSETS - 100.00% $ 149,393,013
==============
</Table>
+ Company filed for Chapter 7 bankruptcy on August 14, 2001.
* Non-income producing security
** Cost for Federal income tax purposes is $119,762,648, and net unrealized
appreciation consists of:
<Table>
Gross unrealized appreciation $ 30,303,175
Gross unrealized depreciation (2,660,166)
------------
Net unrealized appreciation $ 27,643,009
============
</Table>
See accompnaying notes to financial statements.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2003
<Table>
ASSETS
Investments in securities at value (cost $119,762,648) (Note 1) $ 147,405,657
Cash 940,129
Receivables:
Capital stock sold 586,547
Dividends and interest 927,564
Prepaid assets 13,258
--------------
TOTAL ASSETS 149,873,155
--------------
LIABILITIES
Payables:
Capital stock redeemed 186,062
Advisory fees 156,670
Distribution expenses (Note 3) 45,158
Other accrued exepnses 92,252
--------------
TOTAL LIABILITIES 480,142
--------------
NET ASSETS $ 149,393,013
==============
CLASS A SHARES
Net assets applicable to 12,573,265 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 137,410,342
==============
Net asset value and redemption price per Class A Share
($137,410,342 DIVIDED BY 12,573,265 shares) $ 10.93
==============
Offering price per share ($10.93 DIVIDED BY 0.9475) $ 11.54
==============
CLASS B SHARES
Net assets applicable to 1,078,838 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 11,982,671
==============
Net asset value and offering price per Class B Share
($11,982,671 DIVIDED BY 1,078,838 shares) $ 11.11
==============
Redemption price per share ($11.11 X 0.9425) $ 10.47
==============
SOURCE OF NET ASSETS
At October 31, 2003, net assets consisted of:
Paid-in capital $ 121,750,004
Net unrealized appreciation on investments 27,643,009
--------------
NET ASSETS $ 149,393,013
==============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2003
<Table>
INVESTMENT INCOME
Dividends $ 6,004,376
Interest 6,129
---------------
TOTAL INVESTMENT INCOME 6,010,505
---------------
EXPENSES
Investment advisory fees (Note 3) 1,170,121
Transfer agent fees 266,000
Administration fees 135,223
Distribution fees - Class A (Note 3) 329,662
Distribution fees - Class B (Note 3) 107,437
Accounting fees 75,143
Registration fees 23,700
Legal fees 20,405
Custodian fees 27,300
Printing expense 41,882
Amortization of organization costs (Note 1) 4,386
Auditing fees 9,500
Directors' fees 17,271
Insurance expense 16,045
Miscellaneous expense 4,295
---------------
TOTAL EXPENSES 2,248,370
Recoupment of waived and reimbursed expenses (Note 3) 203,267
---------------
NET EXPENSES 2,451,637
---------------
NET INVESTMENT INCOME 3,558,868
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions 1,098,567
Net change in unrealized appreciation of investments 28,223,895
---------------
Net realized and unrealized gain on investments 29,322,462
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 32,881,330
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2003 OCTOBER 31,2002
---------------- ---------------
OPERATIONS
Net investment income $ 3,558,868 $ 3,191,643
Net realized gain from security transactions and REITs 1,098,567 1,301,351
Net change in unrealized appreciation/depreciation of investments 28,223,895 (1,124,599)
---------------- ---------------
Net increase in net assets 32,881,330 3,368,395
---------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income:
Class A (3,280,399) (2,922,634)
Class B (282,851) (317,570)
---------------- ---------------
Total distributions from net investment income to shareholders (3,563,250) (3,240,204)
---------------- ---------------
Distributions from realized gains
Class A (1,007,189) (1,043,314)
Class B (91,378) (115,240)
---------------- ---------------
Total distributions from realized gains to shareholders (1,098,567) (1,158,554)
---------------- ---------------
Excess of net investment income
Class A - (128,803)
Class B - (13,994)
---------------- ---------------
Total distributions in excess of net investment income to shareholders - (142,797)
---------------- ---------------
Return of capital:
Class A (2,655,884) (783,371)
Class B (228,510) (85,112)
---------------- ---------------
Total distributions from net return of capital to shareholders (2,884,394) (868,483)
---------------- ---------------
Total distributions to shareholders (7,546,211) (5,410,038)
---------------- ---------------
CAPITAL SHARE TRANSACTIONS (DOLLAR ACTIVITY)
Shares sold:
Class A 43,934,245 49,957,616
Class B 1,304,630 4,028,639
Shares issued as reinvestment of distributions:
Class A 4,949,904 3,407,909
Class B 458,177 395,801
Shares redeemed:
Class A (20,373,141) (13,570,924)
Class B (1,713,839) (949,265)
---------------- ---------------
Increase in net assets derived from capital share transactions (a) 28,559,976 43,269,776
---------------- ---------------
Total increase in net assets 53,895,095 41,228,133
NET ASSETS
Beginning of period 95,497,918 54,269,785
---------------- ---------------
End of period $ 149,393,013 $ 95,497,918
================ ===============
(a) Transactions in capital stock were:
Shares sold:
Class A 4,497,043 5,213,263
Class B 134,229 414,278
Shares issued as reinvestment of dividends:
Class A 508,805 353,722
Class B 46,596 40,378
Shares redeemed:
Class A (2,016,435) (1,416,401)
Class B (154,195) (98,748)
---------------- ---------------
Increase in shares outstanding 3,016,043 4,506,492
================ ===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest
outstanding throughout the periods presented.
<Table>
<Caption>
CLASS B CLASS B CLASS B CLASS B CLASS B
------------ ------------ ------------ ------------ ------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2003 2002 2001 2000 1999
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.11 $ 8.98 $ 7.53 $ 7.51 $ 8.64
------------ ------------ ------------ ------------ ------------
Income from Investment Operations:
Net investment income 0.26 0.35 0.28 0.40 0.40
Net realized and unrealized gain/(loss) on
investments 2.30 0.36 1.63 0.16 (0.99)
------------ ------------ ------------ ------------ ------------
Total from investment operations 2.56 0.71 1.91 0.56 (0.59)
------------ ------------ ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.26) (0.34) (0.28) (0.40) (0.42)
Distributions from capital gains (0.09) (0.12) - - -
Distributions in excess of ordinary income - (0.01)
Distributions from return of capital (0.21) (0.11) (0.18) (0.14) (0.12)
------------ ------------ ------------ ------------ ------------
Total distributions (0.56) (0.58) (0.46) (0.54) (0.54)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 11.11 $ 9.11 $ 8.98 $ 7.53 $ 7.51
============ ============ ============ ============ ============
TOTAL RETURN(1) 28.43% 7.59% 25.56% 7.72% (7.09)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 11,983 $ 9,583 $ 6,254 $ 2,560 $ 2,645
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 2.50% 2.63% 2.99% 4.43% 4.05%
After expense reimbursement or recapture 2.67% 2.67% 2.67% 2.67% 2.67%
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement or recapture 2.48% 3.34% 4.72% 3.59% 3.47%
After expense reimbursement or recapture 2.31% 3.30% 5.04% 5.35% 4.85%
Portfolio turnover 1.52% 1.25% 12.04% 21.55% 8.15%
</Table>
(1) Calculation does not reflect CDSC charges.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
<Table>
<Caption>
CLASS A CLASS A CLASS A CLASS A CLASS A
------------ ------------ ------------ ------------ ------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2003 2002 2001 2000 1999
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.96 $ 8.84 $ 7.41 $ 7.48 $ 8.66
------------ ------------ ------------ ------------ ------------
Income from Investment Operations:
Net investment income 0.30 0.40 0.31 0.45 0.49
Net realized and unrealized gain/(loss) on
investments 2.30 0.36 1.63 0.15 (1.02)
------------ ------------ ------------ ------------ ------------
Total from investment operations 2.60 0.76 1.94 0.60 (0.53)
------------ ------------ ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.30) (0.40) (0.31) (0.45) (0.53)
Distributions from capital gains (0.09) (0.12) - - -
Distributions in excess of ordinary income - (0.01)
Distributions from return of capital (0.24) (0.11) (0.20) (0.22) (0.12)
------------ ------------ ------------ ------------ ------------
Total distributions (0.63) (0.64) (0.51) (0.67) (0.65)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 10.93 $ 8.96 $ 8.84 $ 7.41 $ 7.48
============ ============ ============ ============ ============
TOTAL RETURN(1) 30.07% 8.26% 26.40% 8.33% (6.38)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 137,410 $ 85,915 $ 48,016 $ 10,936 $ 11,225
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 1.80% 1.93% 2.29% 3.73% 3.35%
After expense reimbursement or recapture 1.97% 1.97% 1.97% 1.97% 1.97%
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement or recapture 3.18% 4.04% 4.12% 4.29% 4.17%
After expense reimbursement or recapture 3.01% 4.00% 4.44% 6.05% 5.55%
Portfolio turnover 1.52% 1.25% 12.04% 21.55% 8.15%
</Table>
(1) Calculation does not reflect sales load.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Spirit of America Real Estate Fund (the "Fund"), a series of the
Spirit of America Investment Fund, Inc. (the "Company"), is an open-end
diversified mutual fund registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Company was incorporated under the laws of
Maryland on May 15, 1997. The Fund commenced operations on January 9, 1998. The
authorized capital stock of the Fund is one billion (1,000,000,000) shares, par
value of $0.001 per share.
The Fund seeks growth of capital and current income by investing in equity Real
Estate Investment Trusts and the equity securities of real estate industry
companies. The Fund offers two classes of shares (Class A and Class B). Each
class of shares has equal rights as to earnings and assets except that each
class bears different distribution expenses. Each class of shares has exclusive
voting rights with respect to matters that affect just that class. Income,
expenses (other than expenses attributable to a specific class), and realized
and unrealized gains and losses on investments are allocated to each class of
shares based on its relative net assets.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITY VALUATION: The offering price and net asset value per share of each
class of the Fund are calculated as of the close of regular trading on the NYSE,
currently 4:00 p.m., Eastern Time. The Fund's securities are valued at the
official close or the last reported sales price on the principal exchange on
which the security trades, or if no sales price is reported, the mean of the
latest bid and asked prices is used. Securities traded over-the-counter are
priced at the mean of the latest bid and asked prices. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which the
Board of Directors believes represents fair value. Fund securities for which
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the
supervision of the Board of Directors. There were no securities, however, fair
valued during this fiscal year.
B. INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost basis
for both financial statement and federal income tax purposes. Dividend income
and distributions to shareholders are reported on the ex-dividend date. Interest
income and expenses are accrued daily.
C. FEDERAL INCOME TAXES: The Fund intends to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
D. NET ASSET VALUE PER SHARE: The methodology and procedures for determining net
asset value are identical for each class of shares, but due to the specific
distribution expenses and other costs allocable to each class of shares, the net
asset value of each class of shares will vary. Class A Shares are purchased at
the offering price per share (which includes a sales load), while Class B shares
are purchased at the net asset value per share.
<Page>
E. ORGANIZATION COSTS: Organization costs are being amortized on a straight-line
basis over five years from commencement of operation.
F. USE OF ESTIMATES: In preparing financial statements in conformity with
generally accepted accounting principles in the United States, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
G. DISTRIBUTIONS TO SHAREHOLDERS: The Fund intends to distribute substantially
all of its net investment income and capital gains to shareholders each year.
Normally, income dividends will be paid quarterly. All such dividends and
distributions are taxable to the shareholders whether received in cash or
reinvested in shares. As a result, a portion of the distributions paid to the
Fund and subsequently distributed to shareholders may be characterized as a
return of capital.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Investment transactions for the fiscal year ended October 31, 2003, excluding
short-term investments, were as follows:
<Table>
<Caption>
PROCEEDS
PURCHASES FROM SALES
----------------------------------------------------------
Real Estate Fund $ 30,450,172 $ 1,810,715
</Table>
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Spirit of America Management Corp. ("Spirit Management") has been retained to
act as the Company's manager and investment adviser pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). Spirit Management was
incorporated in 1997 and is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. Under the Advisory Agreement, the Fund pays
Spirit Management a monthly fee of 1/12 of 0.97% on the Fund's average daily net
assets. Investment advisory fees and other transactions with affiliates, for the
fiscal year ended October 31, 2003, were as follows:
<Table>
<Caption>
INVESTMENT ADVISORY VOLUNTARY EXPENSE
FEE RATE LIMITATION ADVISORY FEES
-----------------------------------------------------------------
Real Estate Fund Class A 0.97% 1.97% $ 1,065,989
Real Estate Fund Class B 0.97% 2.67% 104,132
</Table>
<Table>
<Caption>
EXPENSES WAIVED EXPENSES REMAINING
AND REIMBURSED RECAPTURED RECAPTURABLE
BY THE ADVISOR BY THE ADVISOR EXPENSES AVAILABLE
-----------------------------------------------------------------
Real Estate Fund $ - $ 203,267 $ 64,452
</Table>
<Page>
The Fund has adopted distribution plans for Real Estate Fund Class A Shares and
Real Estate Fund Class B Shares pursuant to Rule 12b-1 (each a "Plan"). Each
Plan permits the Real Estate Fund to pay SSH Securities, Inc. (the
"Distributor"), a monthly fee from the assets of the respective class for the
Distributor's services and expenses in distributing shares of each class and
providing personal services and/or maintaining shareholder accounts.
<Table>
<Caption>
DISTRIBUTION DISTRIBUTION
FEE RATE FEES
-------------- --------------------
Real Estate Fund Class A 0.30% $ 329,662
Real Estate Fund Class B 1.00% 107,437
</Table>
Real Estate Fund Class A Shares are subject to an initial sales charge imposed
at the time of purchase, in accordance with the Fund's current prospectus.
Certain redemptions of Real Estate Fund Class B shares made within six years of
purchase are subject to a contingent deferred sales charge ("CDSC"), in
accordance with the Fund's current prospectus. For the fiscal year ended
October 31, 2003, sales charges and CDSC fees received by the Distributor were
as follows:
<Table>
<Caption>
SALES CHARGES CONTINGENT DEFERRED
RECEIVED BY SSH SALES CHARGES
------------------- ---------------------
Real Estate Class A $ 2,418,679 $ -
Real Estate Class B - 61,369
</Table>
Certain officers and directors of the Company are "affiliated persons" of Spirit
Management or the Distributor, as that term is defined in the 1940 Act. There
are no directors' fees paid to affiliated directors of the Company. All officers
serve without direct compensation from the Company. In addition, David Lerner
Associates, Inc., a registered broker-dealer affiliated with Spirit Management
and the Distributor, received the following brokerage commissions for the fiscal
year ended October 31, 2003:
<Table>
<Caption>
BROKERAGE COMMISSIONS
-------------------------
Real Estate Fund $ 77,906
</Table>
NOTE 4 - FEDERAL INCOME TAXES
The tax character of distributions paid for the fiscal years ended October 31,
2002 and 2003 were as follows:
2003 TAXABLE DISTRIBUTIONS
<Table>
<Caption>
DISTRIBUTIONS IN
ORDINARY NET LONG TERM EXCESS OF TOTAL TAXABLE RETURN TOTAL
INCOME CAPITAL GAINS ORDINARY INCOME DISTRIBUTIONS OF CAPITAL DISTRIBUTION
Real Estate Fund Class A $ 3,280,399 $ 1,007,189 $ - $ 4,287,588 $ 2,655,884 $ 6,943,472
Real Estate Fund Class B 282,851 91,378 - 374,229 228,510 602,739
</Table>
<Page>
2002 TAXABLE DISTRIBUTIONS
<Table>
<Caption>
DISTRIBUTIONS IN
ORDINARY NET LONG TERM EXCESS OF ORDINARY TOTAL TAXABLE RETURN TOTAL
INCOME CAPITAL GAINS INCOME DISTRIBUTIONS OF CAPITAL DISTRIBUTION
Real Estate Fund Class A $ 2,922,634 $ 1,043,314 $ 128,803 $ 4,094,751 $ 783,371 $ 4,878,122
Real Estate Fund Class B 317,570 115,240 13,994 446,804 85,112 531,916
</Table>
As of October 31, 2003, the components of distributable earnings/(deficit) for
the Fund on a tax basis were as follows:
<Table>
Undistributed ordinary income $ -
Undistributed long term capital gains -
Unrealized appreciation 27,643,009
-------------
Total Distributable Earnings $ 27,643,009
=============
</Table>
An estimate of qualified dividend income of $0.00 was received by the fund
through October 31,2003 that qualifies for a reduced tax rate pursuant to The
Jobs and Growth Tax Relief Reconciliation Act of 2003.
<Page>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
SPIRIT OF AMERICA INVESTMENT FUND, INC.
SYOSSET, NEW YORK
We have audited the accompanying statements of assets and liabilities of Spirit
of America Real Estate Fund, a series of shares of beneficial interest in Spirit
of America Investment Fund, Inc., including the schedule of investments as of
October 31, 2003, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on those financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2003 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Spirit
of America Real Estate Fund as of October 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
NOVEMBER 26, 2003
<Page>
Spirit of America Real Estate Fund
MANAGEMENT OF THE COMPANY
(Unaudited)
Information pertaining to the Directors and officers of the Company is set forth
below. The statement of additional information includes additional information
about the Directors and is available without charge, upon request, by calling
516-390-5565.
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS(1) AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST FIVE BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY SERVED YEARS DIRECTOR HELD BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
David Lerner(3) (67) Since President and founder, David Lerner 2 Director of
477 Jericho Turnpike 1998 Associates, Inc., a registered Spirit of America
Syosset, New York 11791 broker-dealer; President, Spirit of Management Corp.,
America Management Corp., the the Company's
Chairman of the Board of Company's investment adviser; and investment
Directors Chief Executive Officer and President adviser; Director
of SSH Securities, Inc., the Company's of SSH
distributor. Securities, Inc.,
the Company's
distributor;
Director of David
Lerner
Associates, Inc.,
a registered
broker dealer.
Daniel Lerner(3) (42) Since Senior Vice President, Investment 2 Director of
477 Jericho Turnpike 1998 Counselor with David Lerner David Lerner
Syosset, New York 11791 Associates, Inc., a registered Associates, Inc.,
broker-dealer, since September 2000. a registered
Director Previously: Broker with Prudential broker-dealer.
Securities from February 2000 to July
2000; Broker with Bear Stearns from
January 1999 to May 1999; Vice
President of SSH Securities, Inc., the
Company's distributor and Senior Vice
President, Investment Counselor and
Assistant Director of Training for
David Lerner Associates, Inc., from
1984 to 1997.
DISINTERESTED
DIRECTORS
Allen Kaufman (67) Since President and Chief Executive Officer 2 Director of
1998 of K.G.K. Agency, Inc., a property and K.G.K. Agency,
Director casualty insurance agency, since 1963. Inc., a property
and casualty
insurance agency.
</Table>
<Page>
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS(1) AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST FIVE BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY SERVED YEARS DIRECTOR HELD BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------
Thomas P. Reynolds (63) Since President of Thomas P. Reynolds 2 Chairman of the
1999 Securities, Ltd., a broker-dealer, Board of
Director since 1979. Directors of
Thomas P. Reynolds
Securities, Ltd.,
a broker-dealer.
Stanley S. Thune (67) Since President and Chief Executive Officer, 2 Director of
1998 Freight Management Systems, Inc., a Freight Management
Director third party logistics management Systems, Inc.
company, since 1994; private investor.
EXECUTIVE OFFICERS
David Lerner
(see biography above)
President
Alan P. Chodosh (49) Since Senior Vice President and Chief NA NA
477 Jericho Turnpike 2003 Financial Officer of David Lerner
Syosset, New York 11791 Associates, Inc. since June 1997
Treasurer
</Table>
(1) If necessary, each Director may be contacted by writing to the Company, c/o
Spirit of America Management Corp., 477 Jericho Turnpike, Syosset, New York
11791.
(2) Each Director serves for an indefinite term, until his successor is
elected.
(3) David Lerner is an "interested" Director, as defined in the 1940 Act, by
reason of his position with Spirit of America Management Corp., the
Company's adviser and Daniel Lerner is an "interested" Director by reason
of his position with SSH Securities Inc., the Company's distributor. Daniel
Lerner is the son of David Lerner.
Proxy Voting Information
A description of the Company's proxy voting policies and procedures is available
(i) without charge, upon request, by calling (516) 390-5565; and (ii) on the
Securities and Exchange Commissions website at http://www.sec.gov.
<Page>
December 2003
Dear Shareholder,
We are pleased to present you with the annual report of the Spirit of
America Value Fund for the period ended October 31, 2003. We believe that the
fund will continue to benefit from the continued growth of the economy.
We believe that our present holdings have not fully appreciated in value
and that we have invested in several sectors and individual companies, which are
substantially under-valued due to short term factors or circumstances.
We invest in New York Stock Exchange listed stocks, specifically avoiding
investment in higher risk, small cap tech and bio-tech stocks which may produce
short term rapid appreciation, but whose prices are based on very high
price/earnings ratios, and therefore, we believe contain substantial down-side
risk.
We believe that our portfolio contains companies which may benefit from a
continued economic recovery over the next 12 to 18 months.
Although all investment contains risk, it is our intention to continue
investing in under-valued sectors and stocks, while always attempting to
minimize risks. You should however be aware that the return on your investment
will fluctuate and that upon redemption or sale of your shares the value of your
shares may be less than the value of your original investment.
For more complete information about the Spirit of America Value Fund and a
prospectus, call your broker or (800) 452-4892 or (610) 382-7819. Please read
the prospectus completely before investing.
We are grateful for your investment and support, and we will strive to
continue to produce similar successful results.
Sincerely
David Lerner
<Page>
SPIRIT OF AMERICA VALUE FUND
ILLUSTRATION OF $10,000 INVESTMENT
The graph below compares the increase in value of a $10,000 investment in the
Spirit of America Value Fund with the performance of the Russell 1000 Value
Index. The values and returns for Spirit of America Value Fund include
reinvested dividends, and the impact of the maximum sales charges placed on
purchases. The returns shown do not reflect taxes that a shareholder would pay
on fund distributions or on the redemption of fund shares.
[CHART]
Average Annual Total Returns Periods Ended October 31, 2003
<Table>
1 Year 10.29%
Since Inception 5.02%*
</Table>
<Table>
<Caption>
SPIRIT OF AMERICA VALUE FUND* RUSSELL 1000 VALUE INDEX
8/1/2002 9,475 10,000
10/31/2002 9,128 9,816
01/31/03 8,862 9,673
04/30/03 9,249 10,194
07/31/03 9,952 11,078
10/31/03 10,631 11,749
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Fund commenced operations August 1, 2002.
<Page>
SPIRIT OF AMERICA VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2003
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
COMMON STOCKS - 97.60%
ALUMINUM - 1.19%
Alcan, Inc. 3,100 $ 123,783
Alcoa, Inc. 2,600 82,082
------------
205,865
------------
APARTMENTS (REITS) - 2.32%
Apartment Investment & Management Co. 9,800 400,820
------------
BANKS - 13.44%
Bank of America Corp. 5,300 401,369
Bank One Corp. 10,200 432,990
Fleet Boston Financial Corp. 6,500 262,535
KeyCorp 7,600 214,700
US Bankcorp 20,800 566,176
Wells Fargo & Co. 7,900 444,928
------------
2,322,698
------------
COMPUTER INDUSTRY - 8.48%
Hewlett-Packard 33,600 749,616
International Business Machines Corp. 8,000 715,840
------------
1,465,456
------------
CONSUMER PRODUCTS - 10.32%
Altria Group, Inc. 11,300 525,450
Avon Products, Inc. 4,900 333,004
Colgate-Palmolive Co. 3,700 196,803
Gillette Co. 6,100 194,590
Kimberly-Clark Corp. 800 42,248
Maytag Corp. 15,100 383,540
Procter & Gamble Co. 1,100 108,119
------------
1,783,754
------------
DIVERSIFIED FINANCIAL SERVICES - 15.01%
American Express Co. 14,800 694,564
Capital One Financial Corp. 12,000 729,600
Citigroup Inc. 11,200 530,880
MBNA Corp. 25,800 638,550
------------
2,593,594
------------
ENERGY - 4.91%
American Electric Power Company, Inc. 11,300 318,547
Consolidated Edison, Inc. 8,700 352,089
Duke Energy Corp. 9,800 177,870
------------
848,506
------------
</Table>
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
FOOD & BEVERAGE - 13.05%
Archer-Daniels-Midland Co. 6,500 93,275
Cadbury Schweppes plc. 6,200 161,200
Coca-Cola Co. 9,900 459,360
Del Monte Foods Co. * 1,161 11,041
General Mills, Inc. 6,100 273,585
H.J. Heinz Co. 9,200 325,036
Kellog Co. 5,800 192,154
Kraft Foods, Inc. 1,300 37,830
Kroger Co. * 8,800 153,912
PepsiCo Inc. 3,600 172,152
Sara Lee Corp. 14,300 284,999
Wm. Wrigley Jr. Co. 1,600 90,240
------------
2,254,784
------------
HEALTHCARE (REITS) - 1.04%
National Health Investors, Inc. 4,700 99,875
Nationwide Health Properties, Inc. 4,400 80,520
------------
180,395
------------
INDUSTRIAL (REITS) - 1.29%
First Industrial Realty Trust, Inc. 6,900 222,870
------------
INSURANCE - 0.06%
Travelers Property Casualty Corp. CL A 216 3,521
Travelers Property Casualty Corp. CL B 443 7,252
------------
10,773
------------
MULTIMEDIA - 1.92%
Time Warner Inc. * 10,600 162,074
Viacom, Inc. CL A 1,400 55,776
Walt Disney Co. 5,000 113,200
------------
331,050
------------
NET LEASE (REITS) - 1.25%
Lexington Corp. Properties Trust 11,300 216,734
------------
OFFICE SPACE (REITS) - 1.29%
Mack-Cali Realty Corp. 5,900 222,371
------------
PHARMACEUTICALS - 1.28%
Bristol-Myers Squibb Co. 3,000 76,110
Eli Lilly and Co. 1,000 66,620
Medco Health Solutions, Inc. * 192 6,374
Merck and Co. Inc. 1,600 70,800
------------
219,904
------------
REGIONAL MALLS (REITS) - 0.91%
Glimcher Realty Trust 7,400 156,732
------------
RESTURANTS - 0.30%
Wendy's International, Inc. 1,400 51,870
------------
</Table>
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
RETAIL - 13.00%
Target Corp. 17,100 679,554
TJX Companies Inc. 18,500 388,315
Walgreen Co. 12,000 417,840
Wal-Mart Stores Inc. 12,900 760,455
------------
2,246,164
------------
SHOPPING CENTERS (REITS) - 4.30%
Commercial Net Lease Realty 12,400 213,280
Federal Realty Investment Trust 5,000 189,750
New Plan Excel Realty Trust 9,900 224,730
Ramco-Gershenson Properties Trust 2,500 60,375
Realty Income Corp. 1,400 55,160
------------
743,295
------------
TRANSPORT SERVICES - 1.34%
FedEx Corp. 1,700 128,792
United Parcel Service, Inc. 1,400 101,528
------------
230,320
------------
WASTE MANAGEMENT - 0.90%
Waste Management, Inc. 6,000 155,520
------------
TOTAL INVESTMENTS - 97.60%
(Cost $15,199,382**) 16,863,475
CASH AND OTHER ASSETS NET OF LIABILITIES - 2.40% 415,396
------------
NET ASSETS - 100.00% $ 17,278,871
============
</Table>
* Non-income producing security
** Cost for Federal income tax purposes is $15,199,382, and net unrealized
appreciation consists of:
<Table>
Gross unrealized appreciation $ 1,728,948
Gross unrealized depreciation (64,855)
------------
Net unrealized appreciation $ 1,664,093
============
</Table>
See accompanying notes to financial statements.
<Page>
SPIRIT OF AMERICA VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2003
<Table>
ASSETS
Investments in securities at value (cost $15,199,382)(Note 1) $ 16,863,475
Cash 179,579
Receivables:
Capital stock sold 275,435
Dividends and interest 20,508
Prepaid assets 4,900
------------
TOTAL ASSETS 17,343,897
------------
LIABILITIES
Payables:
Capital stock redeemed 32,194
Accrued expenses 19,273
Accrued distribution expense (Note 3) 4,145
Due to Advisor 9,414
------------
TOTAL LIABILITIES 65,026
------------
NET ASSETS
Net assets applicable to 1,557,623 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 17,278,871
============
Net asset value and redemption price per share
($17,278,871 DIVIDED BY 1,557,623 shares) $ 11.09
============
Offering price per share ($11.09 DIVIDED BY 0.9475) $ 11.70
============
SOURCE OF NET ASSETS
At October 31, 2003, net assets consisted of:
Paid-in capital $ 15,616,891
Accumulated net realized loss on investments (2,113)
Net unrealized appreciation on investments 1,664,093
------------
NET ASSETS $ 17,278,871
============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2003
<Table>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $591) $ 239,686
Interest 3,745
------------
TOTAL INVESTMENT INCOME 243,431
------------
EXPENSES
Investment advisory fees (Note 3) 84,919
Transfer agent fees 35,600
Administration fees 15,456
Distribution fees (Note 3) 26,264
Accounting fees 27,175
Registration fees 13,600
Legal fees 1,372
Custodian fees 8,500
Printing expense 3,100
Auditing fees 12,200
Directors' fees 1,207
Insurance expense 2,271
Miscellaneous expense 1,000
------------
TOTAL EXPENSES 232,664
Expenses waived and reimbursed by Advisor (Note 3) (60,199)
------------
NET EXPENSES 172,465
------------
NET INVESTMENT INCOME 70,966
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions 12,985
Net change in unrealized appreciation of investments 1,691,734
------------
Net realized and unrealized gain on investments 1,704,719
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,775,685
============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE PERIOD
ENDED ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002*
---------------- -----------------
OPERATIONS
Net investment income $ 70,966 $ 2,115
Net realized gain/(loss) from security transactions 12,985 (15,141)
Net change in unrealized appreciation/(depreciation) of
investments 1,691,734 (27,641)
---------------- -----------------
Net increase/(decrease) in net assets 1,775,685 (40,667)
---------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income: (73,081) -
Return of capital: (36,922) -
---------------- -----------------
Total distributions to shareholders (110,003) -
---------------- -----------------
CAPITAL SHARE TRANSACTIONS (DOLLAR ACTIVITY)
Shares sold: 14,136,780 2,615,521
Shares issued as reinvestment of distributions: 99,340 -
Shares redeemed: (1,050,253) (147,532)
---------------- -----------------
Increase in net assets derived from capital share transactions (a) 13,185,867 2,467,989
---------------- -----------------
Total increase in net assets 14,851,549 2,427,322
---------------- -----------------
NET ASSETS
Beginning of period 2,427,322 -
---------------- -----------------
End of period $ 17,278,871 2,427,322
================ =================
(a) Transactions in capital stock were:
Shares sold: 1,448,983 266,737
Shares issued as reinvestment of dividends: 9,778 -
Shares redeemed: (153,102) (14,773)
---------------- -----------------
Increase in shares outstanding 1,305,659 251,964
================ =================
</Table>
* Spirit of America Value Fund commenced investment operation on August 1, 2002
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA VALUE FUND
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest
outstanding throughout the periods presented.
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002*
---------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.63 $ 10.00
---------------- -----------------
Income from Investment Operations:
Net investment income 0.07 0.01
Net realized and unrealized gain/(loss) on investments 1.51 (0.38)
---------------- -----------------
Total from investment operations 1.58 (0.37)
---------------- -----------------
Less Distributions:
Distributions from net investment income (0.08) -
Distributions from return of captial (0.04) -
---------------- -----------------
Total distributions (0.12) -
---------------- -----------------
NET ASSET VALUE, END OF PERIOD 11.09 $ 9.63
================ =================
TOTAL RETURN(2) 16.47% (3.70)%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 17,279 $ 2,427
Ratio of expenses to average net assets:
Before expense reimbursement 2.65% 7.38%(3)
After expense reimbursement 1.97% 1.97%(3)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement 0.12% (4.75)%(3)
After expense reimbursement 0.80% 0.66%(3)
Portfolio turnover 0.00%% 21.59%(1)
</Table>
* The Fund commenced investment operations on August 1, 2002.
(1) Calculation is not annualized.
(2) Calculation does not reflect sales load.
(3) Calculation is annualized
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA VALUE FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Spirit of America Value Fund (the "Fund"), a series of Spirit of America
Investment Fund, Inc. (the "Company"), is an open-end diversified mutual fund
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Company was incorporated under the laws of Maryland on May 15, 1997.
The Fund commenced operations on August 1, 2002. The authorized capital stock of
the Fund is 500 million (500,000,000) shares, par value of $0.001 per share. The
Fund seeks capital appreciation with a secondary objective of current income by
investing in equity securities in the value segment of the market. The Fund
offers one class of shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITY VALUATION: The offering price and net asset value per share for the
Fund are calculated as of the close of regular trading on the NYSE, currently
4:00 p.m., Eastern Time. The Fund's securities are valued at the official close
or the last reported sales price on the principal exchange on which the security
trades, or if no sales price is reported, the mean of the latest bid and asked
prices is used. Securities traded over-the-counter are priced at the mean of the
latest bid and asked prices. Short-term investments having a maturity of 60 days
or less are valued at amortized cost, which the Board of Directors believes
represents fair value. Fund securities for which market quotations are not
readily available are valued at fair value as determined in good faith under
procedures established by and under the supervision of the Board of Directors.
There were no securities, however, fair valued during this fiscal year.
B. INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost basis
for both financial statement and federal income tax purposes. Dividend income
and distributions to shareholders are reported on the ex-dividend date. Interest
income and expenses are accrued daily.
C. FEDERAL INCOME TAXES: The Fund intends to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
D. USE OF ESTIMATES: In preparing financial statements in conformity with
generally accepted accounting principles in the United States, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
E. DISTRIBUTIONS TO SHAREHOLDERS: The Fund intends to distribute substantially
all of its net investment income and capital gains to shareholders each year.
Normally, income dividends will be paid quarterly. All such dividends and
distributions are taxable to the shareholders whether received in cash or
reinvested in shares. As a result, a portion of the distributions paid to the
Fund and subsequently distributed to shareholders may be characterized as a
return of capital.
<Page>
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Investment transactions for the fiscal year ended October 31, 2003, excluding
short-term investments, were as follows:
<Table>
<Caption>
PROCEEDS
PURCHASES FROM SALES
--------------------------------------------------
$ 13,509,642 $ 26
</Table>
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Spirit of America Management Corp. ("Spirit Management") has been retained to
act as the Company's manager and investment adviser pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). Spirit Management was
incorporated in 1997 and is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. Under the Advisory Agreement, the Fund pays
Spirit Management a monthly fee of 1/12 of 0.97% on the Fund's average daily net
assets. Investment advisory fees and other transactions with affiliates, for the
fiscal year ended October 31, 2003, were as follows:
<Table>
<Caption>
INVESTMENT ADVISORY VOLUNTARY EXPENSE
FEE RATE LIMITATION ADVISOR FEES
----------------------------------------------------------------------------
0.97% 1.97% $ 84,919
</Table>
<Table>
<Caption>
ADVISORY FEES WAIVED AND EXPENSES REMAINING RECAPTURABLE
REIMBURSED BY THE ADVISOR EXPENSES AVAILABLE
-------------------------------------------------------------------
$ 60,199 $ 77,536
</Table>
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 (the "Plan).
The Plan permits the Fund to pay SSH Securities, Inc. (the "Distributor") a
monthly fee from the assets of the Fund for the Distributor's services and
expenses in distributing shares of the Fund and providing personal services
and/or maintaining shareholder accounts.
<Table>
<Caption>
DISTRIBUTION DISTRIBUTION
FEE RATE FEES
------------------------ ------------------
0.30% $ 26,264
</Table>
The Fund's shares are subject to an initial sales charge imposed at the time of
purchase, in accordance with the Fund's current prospectus. For the fiscal year
ended October 31, 2003, sales charges received by the Distributor were as
follows:
SALES CHARGES
RECEIVED BY SSH
---------------
$ 734,043
<Page>
Certain officers and directors of the Company are "affiliated persons" of Spirit
Management or the Distributor, as that term is defined in the 1940 Act. There
are no directors' fees paid to affiliated directors of the Company. All officers
serve without direct compensation from the Company. In addition, David Lerner
Associates, Inc., a registered broker-dealer affiliated with Spirit Management
and the Distributor, received the following brokerage commissions for the fiscal
year ended October 31, 2003:
BROKERAGE COMMISSIONS
---------------------
$ 21,660
NOTE 4 - FEDERAL INCOME TAXES
The tax character of distributions paid for the fiscal year ended October 31,
2003 is as follows:
<Table>
<Caption>
DISTRIBUTIONS
IN EXCESS OF RETURN
ORDINARY NET LONG TERM ORDINARY TOTAL TAXABLE OF TOTAL
INCOME CAPITAL GAINS INCOME DISTRIBUTION CAPITAL DISTRIBUTIONS
-------- ------------- ------------- ------------- --------- -------------
$ 73,081 $ - $ - $ 73,081 $ 36,922 $ 110,003
</Table>
As of October 31, 2003, the components of distributable earnings/(deficit) for
the Fund on a tax basis were as follows:
<Table>
Undistributed ordinary income $ -
Capital loss carryforward (2,113)
Unrealized appreciation 1,664,093
-----------
Total Distributable Earnings $ 1,661,980
===========
</Table>
As of October 31, 2003, the Fund has a capital loss carryover available to
offset future capital gains, if any, as follows:
EXPIRING IN 2010
----------------
$ 2,113
An estimate of qualified income of $64,475 was received by the Fund through
October 31,2003 that qualifies for a reduced tax rate pursuant to The Jobs and
Growth Tax Relief Reconciliation Act of 2003.
<Page>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
SPIRIT OF AMERICA INVESTMENT FUND, INC.
SYOSSET, NEW YORK
We have audited the accompanying statement of assets and liabilities of Spirit
of America Value Fund, a series of shares of beneficial interest in Spirit of
America Investment Fund, Inc., including the schedule of investments as of
October 31, 2003, the related statement of operations for the year then ended,
and the statements of changes in net assets and the financial highlights for the
periods indicated thereon. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on those financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2003 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Spirit
of America Value Fund as of October 31, 2003, the results of its operations for
the year then ended, and changes in its net assets and the financial highlights
for the periods indicated thereon, in conformity with accounting principles
generally accepted in the United States of America.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
NOVEMBER 26, 2003
<Page>
Spirit of America Value Fund
MANAGEMENT OF THE COMPANY
(Unaudited)
Information pertaining to the Directors and officers of the Company is set forth
below. The statement of additional information includes additional information
about the Directors and is available without charge, upon request, by calling
516-390-5565.
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS(1) AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST FIVE BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY SERVED YEARS DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
David Lerner(3) (67) Since President and founder, David Lerner 2 Director of Spirit
477 Jericho Turnpike 1998 Associates, Inc., a registered of America
Syosset, New York 11791 broker-dealer; President, Spirit of Management Corp.,
America Management Corp., the Company's the Company's
Chairman of the Board of investment adviser; and Chief Executive investment adviser;
Directors Officer and President of SSH Securities, Director of SSH
Inc., the Company's distributor. Securities, Inc.,
the Company's
distributor;
Director of David
Lerner Associates,
Inc., a registered
broker dealer.
Daniel Lerner(3) (42) Since Senior Vice President, Investment 2 Director of David
477 Jericho Turnpike 1998 Counselor with David Lerner Associates, Lerner Associates,
Syosset, New York 11791 Inc., a registered broker-dealer, since Inc., a registered
September 2000. Previously: Broker with broker-dealer.
Director Prudential Securities from February 2000
to July 2000; Broker with Bear Stearns
from January 1999 to May 1999; Vice
President of SSH Securities, Inc., the
Company's distributor and Senior Vice
President, Investment Counselor and
Assistant Director of Training for David
Lerner Associates, Inc., from 1984 to 1997.
DISINTERESTED DIRECTORS
Allen Kaufman (67) Since President and Chief Executive Officer of 2 Director of K.G.K.
1998 K.G.K. Agency, Inc., a property and Agency, Inc., a
Director casualty insurance agency, since 1963. property and
casualty insurance
agency.
</Table>
<Page>
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS(1) AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST FIVE BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY SERVED YEARS DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas P. Reynolds (63) Since President of Thomas P. Reynolds 2 Chairman of the
1999 Securities, Ltd., a broker-dealer, since Board of Directors
Director 1979. of Thomas P. Reynolds
Securities, Ltd., a
broker-dealer.
Stanley S. Thune (67) Since President and Chief Executive Officer, 2 Director of Freight
1998 Freight Management Systems, Inc., a Management Systems,
Director third party logistics management Inc.
company, since 1994; private investor.
EXECUTIVE OFFICERS
David Lerner
(see biography above)
President
Alan P. Chodosh (49) Since Senior Vice President and Chief NA NA
477 Jericho Turnpike 2003 Financial Officer of David Lerner
Syosset, New York 11791 Associates, Inc. since June 1997
Treasurer
</Table>
(1) If necessary, each Director may be contacted by writing to the Company, c/o
Spirit of America Management Corp., 477 Jericho Turnpike, Syosset, New York
11791.
(2) Each Director serves for an indefinite term, until his successor is
elected.
(3) David Lerner is an "interested" Director, as defined in the 1940 Act, by
reason of his position with Spirit of America Management Corp., the
Company's adviser and Daniel Lerner is an "interested" Director by reason
of his position with SSH Securities Inc., the Company's distributor. Daniel
Lerner is the son of David Lerner.
Proxy Voting Information
A description of the Company's proxy voting policies and procedures is available
(i) without charge, upon request, by calling (516) 390-5565; and (ii) on the
Securities and Exchange Commissions website at http://www.sec.gov.
<Page>
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.
(b) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code
of ethics description.
(c) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set
forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Registrant's Board of Directors has determined that it does not have an "audit
committee financial expert" serving on its audit committee. While Registrant
believes that each of the members of its audit committee has sufficient
knowledge of accounting principles and financial statements to serve on the
audit committee, none has the requisite experience to qualify as an "audit
committee financial expert"; as such term is defined by the Securities and
Exchange Commission.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
<Page>
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required by
this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17
CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
<Page>
ITEM 10. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
are attached hereto.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Spirit of America Investment Fund, Inc.
-----------------------------------------------------------
By (Signature and Title)* /s/ David Lerner
----------------------------------------------
David Lerner, President
(principal executive officer)
Date January 5, 2004
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ David Lerner
----------------------------------------------
David Lerner, President
(principal executive officer)
Date January 5, 2004
-------------------------------------------------------------------
By (Signature and Title)* /s/ Alan Chodosh
----------------------------------------------
Alan Chodosh, Treasurer
(principal financial officer)
Date January 5, 2004
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.